Arizona’s twin embarrassments: economic ignoramuses

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Arizona's twin embarrassments, Senators Jon Kyl and John McCain, just can't stop lying about Arizona's tax burden and the federal stimulus brouhaha they started.

John McCain was on CNN Wednesday to continue his whining about how the big bad Obama administration was unfairly picking on him and Senator Kyl for their belligerent remarks about the federal stimulus funds earmarked for Arizona. John McCain: The Stimulus is a Failure, But Don't Dare Ask Arizona to Give Any of the Money Back | Video Cafe:

SEN. JOHN MCCAIN (R), ARIZONA: Thank you, Kiran.

CHETRY: Well, you know, your fellow senator, Arizona's Jon Kyl, has said that the stimulus should be canceled. He called it a failure. Do you think that we should stop the spending?

MCCAIN: Jon Kyl was on a talk show on Sunday, talking about how the stimulus has failed, which it has, and only 10 percent of the money has been distributed, and the predictions of the administration were there would be eight percent unemployment. We're now at 9.5 percent, headed for 10.

So, in an arrogant use of power, the president's chief of staff, Mr. Rahm Emanuel, told four cabinet secretaries to send a letter to our governor and ask her if she wanted the money or not. Now, our governor is right in the middle of a fiscal crisis and doesn't need that kind of harassment. So, the point is that the money has been, is being spent. The money has been allocated, and it is a failure and that's what Jon Kyl was talking about. And what Rahm Emanuel did was an arrogant use of power, that's all.

CHETRY: Well, what you're referring to is letters that went out to the governor of Arizona. One of them came from Transportation Secretary Ray LaHood, a Republican, who wrote that if you prefer to forfeit the money we are making available to your state as Senator Kyl suggests, please let me know.

But politics aside, do you think Arizona should say…

MCCAIN: Astonishing that they are making available? My state of Arizona is a donor state. We send more money to Washington than it sends back, so secretary of transportation is making available to Arizona our own money? I tell you, that's a remarkable statement. A remarkable statement.

CHETRY: What I'm wondering, though, is so we have Jon Kyl criticizing the stimulus, and saying that it's failing.

MCCAIN: As have I, and it is.

CHETRY: Right. And both senators from the state are saying that. So, what about perhaps putting your money…

MCCAIN: We're saying it failed.

CHETRY: What about putting your money where your mouth is and, OK, let's not take any money.

MCCAIN: We are saying that it failed, it has failed by any measurement… Blah, Blah, Blah…

I want to focus for a moment on McCain's "donor state" comment. Where did he get this assertion from? Why, from the Libertarian Heritage Foundation, of course. 'Donor states' must team up:

States like Arizona – called "donor states" – pay far more fuel taxes into the federal highway trust fund than they ever get back. By joining forces with the two dozen other donor states, Arizona can start getting its fair share.

This right-wing talking point that McCain is narrowly focused on is the 18.4-cent federal tax on a gallon of gasoline, which hasn't changed since 1993 — you know, the tax that McCain wanted to suspend last summer for a "tax holiday" gimmick during his presidential campaign. Last year Congress had to transfer $8 billion into the Highway Trust Fund because it is essentially broke as a result of declining tax revenue due to the steepest economic recession since the Great Depression. Raising the Federal Gas Tax Is a No-Go – WSJ.com The amount would have been more had Congress gone along with McCain's campaign gimmick.

McCain's assertion that Arizona is a "donor state" went unchallenged by the clueless reporter, and thus left the impression with any uninformed viewers that Arizona is a "donor state" for federal tax purposes. Is Arizona a "donor state" for federal tax purposes? The answer is a resounding "No."

According to The Tax Foundation – Tax Research Areas > Arizona:

Federal Tax Burdens and Expenditures: Arizona is a Beneficiary State

Arizona taxpayers receive more federal funding per dollar of federal taxes paid than the average state. Per dollar of Federal tax collected in 2005, Arizona citizens received approximately $1.19 in the way of federal spending. This ranks the state 21st highest among all states, the same ranking as in 1995 when Arizona received $1.13 per dollar of taxes in federal spending. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: California ($0.78), Nevada ($0.65), Utah ($1.07), Colorado ($0.81), and New Mexico ($2.03).

For a comparison of federal tax dollars sent to Washington and federal spending coming back to the state (by state) see The Tax Foundation – Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005 Arizona has always been sucking at the teat of the federal government. Ironically, those "red states" that send Republicans to Congress who complain the loudest about federal taxes and spending tend to benefit the most. (Chart: FY 2004)

Congress approved the $787 billion dollar stimulus package on February 13, 2009. It was designed to pump money into the economy over a two year period, with more money coming in the second year than the first in recognition of the fact that projects take time to get underway. There are local government requirements for zoning, development, engineering and environmental assessments, construction permits, etc. which must be complied with before any work can begin.

By my calculation we are barely five months from the date of passage from the stimulus package. McCain conceded to CNN that only 10 percent of the money has been distributed. He might want to verify his number with his evil twin, Jon Kyl, who has an opinion in the Arizona Daily Star today continuing his whining about how the big bad Obama administration was unfairly picking on him and Senator McCain for their belligerent remarks about the federal stimulus funds earmarked for Arizona. Put 'stimulus' funds to better use "According to the White House Web site, recovery.gov, which tracks how the stimulus money is being spent, only 8.2 percent of the stimulus bill has reached the economy as of July 10."

The disingenuous criticism from McCain and Kyl — they both voted against the stimulus package, then complain that the money is not being spent fast enough while at the same time arguing that we should cancel it — reflects the self-absorbed narcissistic instant gratification culture of American society. There is no acknowledgment of the magnitude of the economic downturn we are in, nor acknowledgment of the fact that it is going to take time to dig out from the economic catastrophe wrought by 30 years of failed Republican economic policies that Kyl and McCain helped to inflict upon this country, and for which they argue we should "stay the course."

They remind me of the man who goes to his doctor for a serious illness and is prescribed penicillin for 14 days. After the first day, the man is not feeling any better so he says to himself, "screw it, I'll try leeches." Instant gratification is unrealistic, and can be deadly.

Both McCain and Kyl use the GOP talking point that unemployment is heading for double digits as alleged proof that the economic stimulus package is "a failure." If anything, it is only an admission that the magnitude of this economic downturn was under-estimated by everyone, as Vice President Joe Biden recently acknowledged.

There is also their disingenuous use of unemployment figures. Unemployment is a "lagging indicator," the result of the previous economic cycle. In economic theory, the unemployment figures from the first half of 2009 are attributable to the previous Bush administration, not the new Obama administration. (Remember how Republicans attributed the 2001 recession to Bill Clinton? They were correct).

We are in the midst of the FY 2009 federal budget adopted by Congress in 2008. The Obama administration's first federal budget, FY 2010, has yet to be fully enacted by the Congress and FY 2010 does not even begin until October 1. The $1.3 trillion dollar deficit for FY 2009 that Republicans are harping about belongs to their boy, George W. Bush, and was inherited by Obama upon taking office.

Finally, there is Jon Kyl's "going Galt" economic theory of a self-correcting economy: "I think every American would agree — and hope — that the recession will be over two years from now. If so, why should we keep spending stimulus money?" Put 'stimulus' funds to better use Ah, the famous last words of Herbert Hoover.

Apparently this economic ignoramus is completely unaware of the downward spiral created by financial market collapse, business contraction, and high unemployment all feeding off one another in a deflationary cycle that leads to depression. Businesses do not invest and create jobs in such a climate out of self interest. It takes a massive infusion of capital from the spender of last resort, the federal government, to jump-start the economy and to restore economic activity.

Keynesian economic policies were the foundation of U.S. economic policy for every president from FDR to Bill Clinton. (Ronald Reagan departed from it during his first term, but returned to it during his second term). It was only when the U.S. departed from Keynesian economic policy over the past decade and experimented with the "free market" religion of Milton Friedman and his acolyte Alan Greenspan that the economy drove off the cliff.

It is time to restore traditional Keynesian economic policies and give them time to work, as these policies always have worked in the past.

And it is time that the media simply ignore Arizona's twin embarrassments. They are economic ignoramuses who only read from the GOP talking points. They do not have an independent thought in their empty heads.